Financial Results

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2016[1] presented by CEO Ernesto Mauri.

2016 was a truly important year in the history of the Mondadori Group, a year in which it successfully completed its strategic repositioning and laid the structural foundations to address the challenges of its new phase of growth.

To start with, the Group confirmed the positive outcome of the path of change that it embarked on in 2014 which, thanks to the steadfast commitment to focus on its core businesses – achieved also through a number of extraordinary transactions – and contain operating costs and overheads, brought a sharp improvement in results and in Mondadori’s ability to generate financial resources.

Over the last three years, the Group has, in fact, doubled adjusted EBITDA, up from 49.1 million euro to 108.5 million euro (approximately 100 million euro pro-forma), and reduced net debt at end 2016 (-263.6 million euro) by approximately 100 million euro versus end 2013 (-363.2 million euro), despite capital expenditure for the acquisitions made in 2016 (approximately 133 million euro, net of disposals).

In 2016, a crucial step was taken with the acquisition of Rizzoli Libri, which has allowed the Group to increase the contribution of the Books business, to consolidate its presence in the Italian Trade market, and to gain a leadership position in the school textbooks market and in the international illustrated books business (USA in particular).

The acquisition of Banzai Media operations was a cornerstone in the growth strategy of Mondadori’s magazine brands: thanks to this deal, the Group has become Italy’s top publisher also in the digital area with a leadership in key areas – women, food, health&wellness – that are complementary and synergistic with the brands held in its portfolio.

2016 also marked a turning point in the relations with the financial market, following admission to the STAR segment of Borsa Italiana, the start of a path that will shine greater light on the Mondadori Group to enhance the value of the Company and of its activities.

Group performance at 31 December 2016
In 2016, consolidated net revenue totaled 1,262.9 million euro, up by 12.4% versus 1,123.2 million euro in 2015.

Pro-forma revenue (based on the consolidation of the acquired companies as from 1 January) would amount to approximately 1,280 million euro.

On a like-for-like basis, the Group dropped by 2.9%.

Consolidated adjusted EBITDA improved sharply in 2016 (+48.5%), amounting to 108.5 million euro versus 73 million euro in the prior year (pro-forma adjusted EBITDA, including the results of Rizzoli Libri and Banzai Media as from 1 January, would amount to approximately 100 million euro).

The Books Area contributed 75.3 million euro, up by 76% (net of the negative contribution in the first quarter of Rizzoli Libri) versus 42.7 million euro in 2015, while Magazines Italy tripled its contribution to reach 10.5 million euro (Banzai Media consolidated for seven months only).

Even on a like-for-like basis, the Group achieved a remarkable performance, with adjusted EBITDA at 88.2 million euro, up by over 20% versus 2015.

The quarter-by-quarter results confirm the Group’s ability to constantly improve its operational effectiveness, despite the challenging scenario of its relevant markets, deriving from the industrial revision actions and re-organization launched and implemented over the last three years, while still maintaining continuous improvement in the publishing quality of its brands as a key objective.

On a like-for-like basis, operational effectiveness improved from 6.5% to 8.1% of consolidated revenue.

Total EBITDA grew by 15.3%, from 81.6 million euro in 2015 to 94 million euro in the reporting period. 2015 benefited from net positive non-recurring items of 21.2 million euro (from the disposal of certain assets) versus net negative non-recurring items of 3.7 million euro in 2016 related to expenses deriving from acquisitions made.

Consolidated EBIT in the year amounted to 60 million euro, improving by approximately 10% versus 54.5 million euro in 2015, as a result of the abovementioned improvement in EBITDA, despite increased amortization of 7.6 million euro from the changed consolidation scope.

Consolidated profit before taxes came to a positive 42.3 million euro, up by 10.4% versus 38.3 million euro in 2015. Financial costs in 2016 amounted to 17.7 million euro versus 16 million euro in 2015, which had benefited from the positive contribution of 1.6 million euro from the derecognition of a number of put options (Kiver, MUK and NaturaBuy), despite the significant investments made in the acquisition of Rizzoli Libri and Banzai Media, which increased average net debt for the year by approximately 20 million euro, offset by a decrease in the average debt rate (inclusive of amortized costs) of approximately 0.5 bps.

Consolidated profit from continuing operations, after minority interests, came to a positive 21.6 million euro, up by 43% versus 15.1 million euro at 31 December 2015.

Group profit at 31 December 2016 came to a positive 22.5 million euro, improving by 16.1 million euro and tripling the 6.4 million euro reported in 2015 (which included the loss of 8.7 million euro from the disposal of Monradio operations). Net profit in 2016 includes a capital gain of 1 million euro, net of relating expenses, from disposals.

The Group’s net financial position at 31 December 2016 came to -263.6 million euro versus -199.4 million euro at 31 December 2015, as a result of cash outlays for extraordinary transactions of 132 million euro, despite the Group’s positive cash generation from ordinary operations of 68 million euro (48 million euro on a like-for-like basis).

At 31 December 2016, cash flow from operations came to a positive 99.4 million euro (74.4 million euro on a like-for-like basis); ordinary cash flow (after the cash-out for financial charges and taxes for the year) amounted to 67.9 million euro, which is net of the cash outlays in the January-March quarter (not consolidated in 2016) of Rizzoli Libri, attributable to the investments made and to the seasonal nature of the Education business; on a like-for-like basis, Group cash generation from ordinary operations came to 48.4 million euro, improving versus 45.4 million euro in 2015.

Cash flow from extraordinary operations came to -132.1 million euro, as a result of capital expenditure net of disposals of 132.6 million euro, restructuring costs of approximately 15 million euro, and cash-ins from prior-years’ taxes amounting to 15.5 million euro.

In 2016, Group employees amounted to 3,261 units (3,076 units in 2015); on a like-for-like basis, the headcount dropped by 6.9% versus 31 December 2015, as a result of the ongoing reorganization process implemented both in Italy and in France.

Business outlook
In 2016, the Mondadori Group accomplished the goals of strategic repositioning and business-financial stability it had set three years ago, securing itself a leadership position and positive profitability in all its business areas, while continuing to push strongly on efficiency measures consistent with the relevant market trends.

Additionally, overall profitability improved significantly in the period, with adjusted EBITDA (pro-forma)[2] at approximately 100 million euro, as well as cash flow from operations, reducing total net debt to adjusted EBITDA (pro-forma) within 2.6x.

Over the 2017-2019 three-year period, the Group will continue efforts to strengthen its competitive position and improve the business and financial performance of its core businesses, through ongoing focus on publishing quality and optimization of operational processes and cost structure, while paying particular attention to the achievement of synergies arising from the integration of Rizzoli Libri, to the development of the Digital Area of Magazines Italy, and to the plan to expand the Franchising channel in the Retail Area.

In line with the above strategy, the plan sets operational targets which, based on the current scope, allow the Group to estimate for 2019 consolidated revenue above 1.3 billion euro, adjusted EBITDA of approximately 115 million euro, a net profit of 35 million euro, cash generation from ordinary operations close to 60 million euro, and a negative net financial position of around 155 million euro, net of the impact of any dividend distribution.

In light of today’s relevant context, it is reasonable to predict for 2017 basically steady pro-forma3 revenue versus 2016 and a “high single-digit” growth of adjusted EBITDA, with a resulting improvement in profit margins. The net profit for the year is expected to rise sharply by approximately 30%. Lastly, net debt at end 2017 is estimated to drop versus 31 December 2016, with a debt/adjusted EBITDA ratio at 2.2/2x.

Business areas
Books
In 2016, the Mondadori Group confirmed its leadership position in the Trade market with a 29.3% share (23.1% on a like-for-like basis, net of Rizzoli Libri brands), and secured itself the top position also in the school textbooks market, following the integration of Rizzoli Education activities, with a 24% share of textbook adoptions[3].

In the reporting period, the Area’s revenue totaled 475.1 million euro, up by 48.1% versus 320.8 million euro in the prior year, due basically to the effects of the consolidation of Rizzoli Libri from the second quarter.

On a like-for-like basis:

• Trade revenue grew by 1.7%, despite the selective publishing policy focused on improving efficiency and profitability;
• the Educational segment was basically steady (-0.4%);
• distribution activities fell sharply due to the termination of a number of distribution contracts.

Adjusted EBITDA increased by approximately 76% to reach 75.3 million euro versus 42.7 million euro in 2015. A result ascribable to the consolidation of Rizzoli Libri as from 1 April 2016 and to the 30.8% increase on a like-for-like basis. The reporting period reaped the benefits of the new management policy launched in 2015, focused on a targeted publishing policy and on the ongoing optimization of the operating processes in the Trade segment, which significantly increased the contribution margin; concurrently, action continued on containing fixed costs which, together with the increased performance of Mondadori’s Educational Area, contributed to further improving profitability, which stood, on a like-for-like basis, at 18.2% versus 13.3% in the prior year.

In the April-December consolidation period, Rizzoli Libri contributed 19.4 million euro to reported EBITDA, mainly as a result of the positive performance of the schools segment, which excludes the negative contribution in the first quarter from the seasonal nature of the Education business.

The Area’s EBITDA amounted to 72.5 million euro, up by 57.7% versus 45.9 million euro in 2015, which included the capital gain of 7.6 million euro from the transfer of the interest held in the Harlequin Mondadori joint venture, despite a higher percentage of restructuring costs versus the prior year (4.3 million euro in 2016 versus 0.5 million euro in 2015). 2016, instead, included charges of 2.3 million euro for the acquisition of Rizzoli Libri.

Retail
In 2016, revenue generated by the Retail Area amounted to 199.6 million euro, in line with the prior year on a like-for-like basis. As of 1 April 2016, following the consolidation of the acquisition of Rizzoli Libri, activities relating to Librerie Rizzoli have been absorbed by the Retail Area; as a result, the Area increased revenue by an overall 1.6%.

The analysis by channel of the Area shows the following:

• a growth in Megastores (+2.4%), driven by the openings of Milano San Pietro all’Orto in June 2015 and Arese in April 2016 (-5.5% on a like-for-like basis);
• the good performance of franchised Bookstores (+0.2%), driven by the development of the network (-1.9% on a like-for-like basis);
• the 4.8% drop of directly-managed bookstores (+2.7% on a store like-for-like basis);
• the growth of the online channel (+8.6%), specifically in the Book product (+12%);
• a more moderate drop by the Bookclub (-3.4%) than in prior years.

In 2016, the Retail Area’s adjusted EBITDA amounted to 2.3 million euro on a like-for-like basis, up by 3.6% versus the prior year (1.8 million euro including the result of Librerie Rizzoli).

A result achieved through ongoing cost-curbing measures, which led to a lower percentage of overheads and personnel costs, despite the reduction in the product margin arising from the different product/channel mix, related also to the structural decline of the book clubs channel.

EBITDA in 2016 amounted to 1.9 million euro (1.4 million euro including the result of Librerie Rizzoli) versus 1.8 million euro in the prior year.

Magazines Italy
In 2016, the Group retained its leadership of the magazine market, with a circulation share, in terms of value, of 31.7%, steady versus December 2015[4].

In the reporting period, the Area’s revenue amounted to 310.8 million euro, basically steady (+0.4%) versus 309.6 million euro in the prior year (-3.8% on a like-for-like basis, net of the effects of the acquisition of Banzai Media, consolidated as from 1 June 2016).

Specifically:

• circulation revenue: down by approximately 3%;
• revenue from add-on products: basically in line with 2015 (-0.6%);
• total advertising revenue: up by approximately 13%, pushed by the acquisition of Banzai Media; on a like-for-like basis, gross advertising sales on Group brands in Italy (print+web) fell by 3.8%.

Banzai Media, consolidated as of June 2016, contributed approximately 12.8 million euro to Magazines Italy revenue, bringing overall revenue of the properties at approximately 18 million euro, basically tripling the figures of 2015, and accounting for 21% of total advertising revenue.

In 2016, the Group reached a unique audience of 16 million/month,[5] becoming Italy’s top digital publisher, a position corroborated by comScore surveys, which reported in December 2016 an audience of 23.7 million unique users/month.

Adjusted EBITDA in the Magazines Italy Area improved sharply, rising from 3.5 million euro to 10.5 million euro, despite the drop in revenue triggered by the market context, driven by the effective review of the publishing structure and by the containment of promotional activities, while retaining the traditional focus on the publishing quality of the titles. The reporting period additionally saw a sharp drop in industrial costs, achieved also as a result of the renegotiation of printing contracts.

The Area’s EBITDA confirmed the growth trend, increasing from 0.4 million euro in 2015 to 3.8 million euro in 2016, as a result of the above actions and despite higher restructuring costs.

Magazines France
Mondadori France’s revenue came to 321.6 million euro in 2016, down by -3.9% versus 334.6 million euro in 2015.

Against a shrinking market backdrop, Mondadori France retained its position as second player in the magazine advertising market, with its share (in terms of volume) steady at 10.9%.

Advertising revenue (print-digital) fell by 6.5% versus 2015: digital advertising (almost 18% of total advertising revenue) grew by over +16%, partly offsetting the decrease from print advertising sales (-10.3% in terms of value).

Circulation revenue (newsstands+subscriptions), which accounts for approximately 75% of the total, showed an overall -2.9% decline, slightly improving versus the prior year, thanks to the steady performance of subscriptions, which make for over half the total (53%).

Digital activities grew by an overall 11.6%, driven by the digital activities of the properties (+9.5%) and by NaturaBuy activities (+23.5%).

Adjusted EBITDA came to 33.2 million euro, down by 8% versus the prior year, due in particular to M&A costs in the year with margins on revenue again above 10% (10.3% in 2016 versus 10.8% in 2015).

In 2016, Mondadori France continued to focus its strategy on editorial and overhead cost containment to counter the lingering weakness of the relevant markets, with a view to further adjusting the organization to market changes, while retaining the ability to make investments in quality and in the gradual digitization of publishing activities. Digital activities continued to enjoy positively growing margins in the reporting period versus 2015.

The Area’s EBITDA, amounting to 30.8 million euro, was down by 5% versus 2015 (32.4 million euro), to a lesser extent as a result also of lower restructuring costs.

Performance of Arnoldo Mondadori Editore S.p.A.
The financial statements of the Parent Company Arnoldo Mondadori Editore S.p.A. show a loss of 15.2 million euro for the year ended 31 December 2016, improving versus 32 million euro reported in the prior year.

Main significant events after year-end
On 29 September 2016, the Board of Directors approved the plan on the merger by incorporation of the subsidiary Banzai Media S.r.l. in Arnoldo Mondadori Editore S.p.A., prepared pursuant to art. 2501-ter and art. 2505, par. 1, of the Italian Civil Code, concurrently approved by the Board of Directors of Banzai Media S.r.l.

The transaction aims to achieve the full integration of Banzai Media activities with the digital properties of Magazines Italy. The value of Banzai Media’s brands will, instead, remain separate and distinct. The merger will give birth to a unified product range with the potential to present itself as a leader to both advertisers and users, improving time to market and sharing the wealth of mutual assets and know-how, leveraging on greater streamlined business processes.

On 8 November, the Board of Directors approved the merger by incorporation, with no share exchange, of the wholly-owned company Banzai Media S.r.l., in accordance with the previously approved merger plan.

The merger, signed on 10 January, took effect for statutory purposes as from 15 January 2017, and for accounting and tax purposes as from 1 January 2017.

The Board of Directors of Arnoldo Mondadori Editore S.p.A. called the Shareholders’ Meeting on Thursday 27 April 2017 in first call.

Renewal of the authorization to purchase and sell treasury shares
Following the expiry of the preceding authorization resolved upon by the Shareholders’ Meeting on 21 April 2016, with the approval of the financial statements at 31 December 2016, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase and sell treasury shares with the aim of retaining the applicability of law provisions in the matter of any additional re-purchase plans and, consequently, of picking up any investment and operational opportunities involving treasury shares.

Here below are the main elements of the proposal made by the Board of Directors:

Motivations
The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:

• to use the treasury shares purchased as compensation for the acquisition of interests within the framework of the Company’s investments;
• to use the treasury shares purchased against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for lending, exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
• to undertake any investments, directly or through intermediaries, including for the purpose of containing abnormal movements in share prices, stabilizing share trading and prices, supporting the liquidity of the share on the market, in order to foster the regular conduct of trading beyond normal fluctuations related to market performance, without prejudice in any case to compliance with applicable statutory provisions;
• to possibly rely on investment or divestment opportunities, if considered strategic by the Company, also in relation to available liquidity;
• to sell treasury shares as part of share-based incentive plans pursuant to art. 114-bis of the TUF, and of plans for the free allocation of shares to Shareholders.

Duration
Until the Shareholders’ Meeting called to approve the financial statements for the year ending 31 December 2017.

Maximum number of purchasable treasury shares
The renewed authorization will enable the Company to reach the cap of 10% of its share capital, also considering the shares held directly and indirectly from time to time, in line with the previous authorization.

Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap
Purchases shall be made on regulated markets pursuant to the combined provisions of art. 132 of Legislative Decree no. 58/1998, of art. 5 of Regulation (EU) 596/2014, (ii) of art. 144-bis of the Issuer Regulation, (iii) of the EU and national legislation on market abuse, and (iv) of Accepted Practices.

Specifically, purchases shall be made on regulated markets, according to operating criteria which do not allow the direct combination of the purchase negotiation proposals with pre-determined sale negotiation proposals.

The minimum and maximum purchase price would be determined under the same conditions established by the preceding Shareholders’ Meeting authorizations, i.e. at a unit price not lower than the official Stock Exchange price of the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price of the day preceding the purchase transaction, increased by 10%.

In terms of daily prices and volumes, the purchase transactions would be completed in compliance with the conditions established in art. 3 of the Delegated Regulation (EU) 2016/1052.

With regard to the sale of treasury shares, the Board of Directors resolved to propose to the Shareholders’ Meeting to sell the shares in any appropriate manner in the interest of the Company, for purposes which include the sale on regulated markets, the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company or third parties, and support to incentive plans approved by the Shareholders’ Meeting.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 80,000 treasury shares, equal to 0.031% of the share capital.

For further information on the proposed authorization for the purchase and sale of treasury shares, reference should be made to the Directors’ Explanatory Report, which will be published within the time limits and in the manner prescribed by current laws and regulations.

Proposed adoption of a Performance Share Plan
The Board resolved, on a proposal from the Remuneration and Appointments Committee, to submit to the approval of the Ordinary Shareholders’ Meeting, the adoption of a Performance Share Plan for 2017/2019, in accordance with art. 114-bis of Legislative Decree no. 58 of 24 February 1998, intended for the CFO-Executive Director and/or other executive managers with strategic responsibilities and/or second-line managers/executives of the Group.

With the adoption of the Plan, the Company aims to incentivize Management to improve medium to long-term performance, in terms of both industrial performance and growth in the value of the Company.

The Plan envisages the right for beneficiaries to receive a bonus in the form of Company shares, subject to the achievement of specific targets set and measured at the end of the three-year performance period from 2017 to 2019.

These targets are structured to include both shareholder remuneration indicators and management indicators functional to raising the share value, ensuring maximum alignment of Management remuneration and the creation of value for the Company.

For details on the proposed adoption of the Performance Share Plan, the beneficiaries and the main characteristics of the Regulations of the Plan, reference should be made to the information document drawn up by the governing body, pursuant to art. 84-bis and annex 3A of the Issuer Regulation, and to the explanatory report, which will be published within the time limits and in the manner prescribed by current laws and regulations.

Proposed amendments to the company by-laws
The Board resolved to submit a proposal to the Extraordinary Shareholders’ Meeting on amendments to art. 7 (adoption of increased voting rights pursuant to art. 127-quinquies of Legislative Decree no. 58/98) and art. 17 (amendments to appointment procedures for the Board of Directors by means of a so-called blocked lists system) of the Company by-laws. For further information on the amendments, reference should be made to the explanatory reports, which will be published within the time limits and in the manner prescribed by current laws and regulations.

Sustainability Report
The Board of Directors of Arnoldo Mondadori Editore S.p.A. also aligned financial and non-financial disclosures by approving its 2016 Sustainability Report, drafted according to the GRI Guidelines, standard G4, based on the “in accordance – core rating”.
A summary of the Sustainability Report in line with the provisions will be supplemented in the Annual Report; the complete document will be made available at the Shareholders’ Meeting.

The 2016 results, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community today, 5:00 PM, at the Mondadori Megastore in piazza Duomo, Milan.

The corresponding documentation will be made available on 1Info at www.1info.it, www.borsaitaliana.it and www.mondadorigroup.com (Investors).

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

Annexes (see attached pdf):

1. Consolidated balance sheet;
2. Consolidated income statement;
3. Consolidated income statement – fourth quarter;
4. Group cash flow;
5. Arnoldo Mondadori Editore S.p.A. balance sheet;
6. Arnoldo Mondadori Editore S.p.A. income statement;
7. Arnoldo Mondadori Editore S.p.A. cash flow statement;
8. Glossary of terms and alternative performance measures used.

[1] On 30 September 2015, the transfer of 80% of the share capital of Monradio S.r.l. to R.T.I. S.p.A. was completed for a consideration of 36.8 million euro. Pursuant to IFRS 5 (“Non-current assets held for sale”), the Group’s radio business was classified as “discontinued operations” and as such entered in these consolidated financial statements. As a result, in the income statement for 2015, the results achieved in the period, along with the depreciation of operations made in order to bring their value in line with the consideration from the transfer, were classified under “Profit/(loss) from discontinued operations”.

[2] Pro-forma figures: consolidation of the companies acquired in 2016 (Rizzoli Libri and Banzai Media) assumed as from 1 January 2016.

[3] AIE, 2016 ministerial data based on textbook adoption (number of sections).

[4] Internal source: Press-di, December 2016.

[5] Source: Audiweb at December 2016

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Report on Operations at 30 September 2016 presented by CEO Ernesto Mauri.

GROUP PERFORMANCE AT 30 SEPTEMBER 2016

In 9M16, Mondadori Group reported a rather encouraging performance. After almost four years, revenue kept steady – on a like-for-like basis – versus the prior year; these results, together with the improvement of EBITDA for the eleventh consecutive quarter, laid the groundwork to improve the outlook for the full year.

Additionally, 2016 marked the transition to the new phase of the Group’s development, as a result of the consolidation of the recently acquired Rizzoli Libri and Banzai Media, a major step made to strengthen the leadership position in the Group’s strategic businesses.

In 9M16, consolidated net revenue grew by 14.3% to 935.3 million euro; net of the effects of the consolidation of the companies acquired in the year, the Group’s performance remained basically steady versus 818.3 million euro posted in the prior year.

Consolidated adjusted EBITDA[1] grew by 58.7% (76.1 million euro versus 48 million euro in 9M15), thanks also to the positive contribution from the companies acquired in 2016, from Rizzoli Libri (16.5 million euro) in particular. The Books Area increased by 65%, while Magazines Italy tripled its performance. The Retail Area, despite the negative impact (from the seasonality of the Rizzoli bookstore in Milan), improved by over 13%.

On a like-for-like basis, the Group’s adjusted EBITDA grew by 23.7%, with a percentage on revenue increasing from 5.9% to 7.3%. This performance is the result of a constant and focused management policy, launched and successfully implemented in all of the business areas; Books (+18.2%) and Magazines Italy (from 1.7 million euro to 6.5 million euro) performed strongly.

Consolidated EBITDA was up by 44% to 70.3 million euro, including the result of Rizzoli Libri and Banzai Media. On a like-for-like basis, the increase amounts to 9.9% (from 48.8 million euro to 53.7 million euro), confirming the Group’s strong and constant efficiency gains from its ability to stabilize revenue and thanks to the industrial and organizational review actions launched and implemented over the past three years, despite the benefits felt in 3Q15 from the capital gain of 7.6 million euro arising from the disposal of the Harlequin Mondadori joint venture (Books Area).

In 9M16, consolidated EBIT was up by 60.1% to 48 million euro, including amortization and depreciation of 5.2 million euro relating to Rizzoli Libri; on a like-for-like basis, EBIT amounted to 37 million euro, improving by 23.4% versus 30 million euro in 9M15, also as a result of the decrease in amortization, depreciation and impairment losses by 16.7 million euro versus 18.8 million euro at 30 September 2015, which included the impairment of 4 million euro of the interest held in the Greek Attica Publications subsidiary (Magazines Italy Area).

The consolidated result before taxes amounted to 35.3 million euro, up versus 16.1 million euro, or to 24.5 million euro on a like-for-like basis, rising sharply (+52.1%) versus 9M15, thanks also to the contribution of financial costs (12.5 million euro), which decreased sharply (-9.2%) as a result of the reduction in the average debt rate from the renegotiation of the loan agreement made at end 2015 (from 3.72% to 3.05%), and of a lower average debt in the period, despite the acquisitions made in 2016.

The Group consolidated net result amounted to 17.9 million euro, improving by over 20 million euro versus -2.8 million euro at 30 September 2015, which included the capital loss from the disposal of the Group’s radio business; on a like-for-like basis, the net result came to a positive 11 million euro.

At 30 September 2016, Group employees amounted to 3,330 units. The 7.8% increase in headcount versus September 2015 is due solely to the acquisitions made over the last 12 months; on a like-for-like basis, Group employees would be down by 5.8%.

The Group net financial position at 30 September 2016 came to -329 million euro versus -243.6 million euro at 30 September 2015, as a result of the Group’s significant cash generation over the past 12 months, which allowed net investments in acquisitions of 135.7 million euro.     

At 30 September 2016, cash flow from operations – on a like-for-like basis – in the last twelve months came to a positive 83.9 million euro; ordinary cash flow (after outlays for financial costs and taxes for the period) continued the upward trend of the seven previous quarters and came to 56.3 million euro. Including the contribution from recent acquisitions, cash flow from ordinary operations in the last twelve months amounted to 53.3 million euro.

This performance is the result of constant and effective monitoring, and the ability to act on and manage all of the economic and financial variables typical of all of the Group’s business areas.

OUTLOOK FOR THE YEAR

In light of the Group’s performance and of the results of the acquired companies, the forecasts previously announced on revenue for the current year can be reasonably confirmed: including Rizzoli Libri (for 9 months) and Banzai Media (for 7 months), revenue is expected to increase by approximately 14%, while, on a like-for-like basis, it is basically steady versus 2015.

Adjusted EBITDA estimate improves: including Rizzoli Libri and Banzai Media, adjusted EBITDA is forecast to grow by approximately 35% (from the previous estimate of +30%), while, on a like-for-like basis, forecasts point to a double-digit growth (from the previous high single-digit estimate) versus 2015, with a resulting increase in profitability.

The net financial position is expected to improve versus the previous forecast (3.5x), with a NFP/EBITDA ratio of about 3.3x, lower than the bank covenant for the year of 4.5x.

PERFORMANCE OF GROUP BUSINESS AREAS AT 30 SEPTEMBER 2016

• BOOKS

In 9M16, the Trade Books market in Italy grew by +2.3% versus 9M15 (GFK, September 2016, figures in terms of market value), confirming the positive signs reported in the first half of the current year.

Against this backdrop, Mondadori Libri retained its market leadership position with a 22.8% trade share.

At 30 September 2016, following the acquisition of the Rizzoli Libri brands (Rizzoli, BUR and Fabbri Editori), the Group increased its overall market share to 27.8%.

In the school textbooks segment, following the integration of Rizzoli Education, the Group increased its market share to 24.1%, becoming the leading player in the segment in Italy.

In the period under review, revenue from the Books Area of Mondadori Group amounted to 355.5 million euro, up by 52.5% as a result of the consolidation of Rizzoli Libri from April 2016 (+1.8% on a like-for-like basis versus 233.2 million euro in 9M15). Rizzoli Libri contributed an overall 118.4 million euro to the period.

On a like-for-like basis, the Trade Books Area revenue increased by 15.7% versus 9M15, as a result of the positive performance of sales from the titles launched between the end of 2015 and the first half of the current year. Regarding the Educational Area, revenue in 9M16 grew by 2.5% on a like-for-like basis versus 9M15.

Adjusted EBITDA in the Area came to 58.6 million euro, rising sharply (+65.1%) versus 9M15 (35.5 million euro); in the reporting period, Rizzoli Libri contributed 16.6 million euro, mainly as a result of the positive performance of the schools segment.

The Books Area performed strongly also on a like-for-like basis, surging by +18.2% (42 million euro at 30 September 2016), propelled by the increase in revenue from the targeted publishing policy and by the ongoing optimization of the operating processes implemented in the Trade segment, which helped slash the percentage of costs of goods sold on revenue. Concurrently, the cost containment policy aimed at cutting fixed costs and discretionary expenses continued and resulted in improved profitability.

Reported EBITDA in the Area amounted to 57.9 million euro versus 39.6 million euro at 30 September 2015, which included the capital gain of 7.6 million euro from the disposal of the interest held in the Harlequin Mondadori joint venture, partly offset in the reporting period by lower restructuring costs versus the prior year.

• MAGAZINES ITALY

Revenue from the Magazines Italy Area amounted to 234.9 million euro, up by 0.8% versus 233 million euro in 9M15 (-2.3% on a like-for-like basis, net of Banzai Media, consolidated as from 1 June 2016)[2].

Against this backdrop, Mondadori Group retained its market leadership position with a 31.8% share (Internal source: Press-di, August).

In 9M16, Banzai Media contributed approximately 7.2 million euro to the Area’s revenue. Following the acquisition, Mondadori has reached a total digital audience of 16.6 million unique monthly users (Audiweb, average figures at August 2016), becoming the leading Italian digital publisher.

Circulation revenue of the Magazines Italy Area dropped by 2.4%; on a like-for-like basis of titles, the drop was basically in line with the relevant market performance (-8.3%, internal source Press-Di, cumulative figures at August 2016: newsstands+subscriptions at cover price) in both the newsstand and subscription channels.

Revenue from advertising sales fell by 2.6%; print advertising sales in Italy dropped by 4% (in line with the market’s -3.6%, Nielsen, cumulative figures at August 2016); sales on websites increased by 0.6% and outperformed the relevant market trend (-1.6%, Nielsen, cumulative figures at August 2016), with the contribution of the consolidation of Mondadori Scienza properties (Nostrofiglio.it and Focus.it).

Revenue from add-on products was steady versus 9M15, thanks to the positive contribution of the home-video business (50% of total), which offset the drop in gadgets and music CDs.

Looking at distribution and revenue towards third publishers, the Area was in line with the prior year, thanks to the ongoing commitment to developing third-publisher portfolios.

International operations achieved revenue of 4.3 million euro, down versus 5.3 million euro reported in 9M15, as a result of the drop in licensing activities caused by the deteriorated market environment.

Revenue from Digital Marketing Service activities (8.7 million euro) grew by approximately 2% versus 9M15, as a result of the gradual expansion of the portfolio of solutions that had started in 2015.

Adjusted EBITDA in the Magazines Italy Area improved significantly to 6.9 million euro (including the contribution of Banzai Media), or to 6.5 million euro on a like-for-like basis versus 1.7 million euro in 9M15, driven by the effective review of the publishing structure, implemented while retaining the traditional focus on the publishing quality of the titles. The reporting period also saw a sharp drop in industrial costs, achieved also as a result of the renegotiation of printing contracts.

The Area EBITDA more than confirmed the growth trend, increasing by over 4 million euro (from 0.8 million euro to 5.4 million euro), despite the higher amount of negative non-recurring items; on a like-for-like basis, reported EBITDA came to 5.1 million euro.

• MAGAZINES FRANCE

In 9M16, revenue from Mondadori France amounted to 239.3 million euro, down by 3% versus 246.8 million euro in 9M15.

Specifically:

• Circulation revenue, accounting for approximately 75% of the total, fell by 2.4% versus the prior year.

Specifically, sales revenue in the subscription channel was basically stable, partly offsetting the decline in the newsstand channel (-6.1%, basically in line with the market trend) and confirming the strategic opportunity for further investments in this channel, which accounted for 53% of circulation revenue in 9M16, representing the major and most growing contribution to revenue of the area.

These positive performances were achieved with the constant attention paid to publishing quality and innovation. In the period under review, Mondadori France, in fact, launched various brand extensions, including Grazia Hommes.

• Advertising revenue fell by an overall 4.6% versus 9M15, but performance differed between offline and online component: digital advertising (accounting for about 20% of total advertising revenue) was up by approximately 22%, partly offsetting the drop in traditional print advertising (-8.9%). Against this backdrop, Mondadori France retained its 6% market share (Kantar Media: cumulative figures in terms of volume at June 2016) and was, once again, the second top player in the magazine advertising market.

Digital activities (approximately 5% of total revenue) grew by an overall 14.8%, propelled by the development of the properties, in addition to the positive performance of NaturaBuy (+29%). The web audience of Mondadori France magazines totaled 8.9 million unique users (Médiamétrie Netratings-Nielsen, January-August 2016 average figure), up by approximately 9% versus 9M15.

Adjusted EBITDA came to 21.3 million euro, down by 3.8% versus 9M15, due mainly to costs for M&A managed in the period (0.7 million euro). Focus continued on editorial and overhead cost containment to counter the lingering weakness of the relevant markets, with a view to further adjusting the organization to market changes, while retaining the ability to make investments in quality and in the gradual digitization of publishing activities. Digital activities continued to enjoy positively growing margins in 9M16 versus the loss in 9M15.

Reported EBITDA, amounting to 19.4 million euro, was down by 3.1% versus 20.0 million euro in 9M15, as a result of the abovementioned M&A costs and of restructuring costs of approximately 1.9 million euro (2.1 million euro in 9M15).

• RETAIL

In 9M16, the Retail Area revenue – on a like-for-like basis – rose to 135 million euro, increasing by 1.1% versus 131.9 million euro in 9M15, due mainly to the growth of the Franchised channel (+3.3%) and of Megastores (+3.8%), which more than offset the structural decline of the Book Clubs; the online channel posted a positive performance (+2.2%), driven mainly by the good results of school textbooks. As of 1 April 2016, following the consolidation of the acquisition of Rizzoli Libri, activities relating to the Rizzoli bookstore have been absorbed by the Retail Area; as a result, in 9M16, the Area increased revenue by an overall 2.4%.

In 9M16, Mondadori Retail adjusted EBITDA, on a like-for-like basis, came to -2.5 million euro, improving versus -3.1 million euro in 9M15 (-2.7 million euro, including the result of Librerie Rizzoli in the April-September six-month consolidation period). A result achieved through cost-curbing measures involving stores and central functions, which more than offset the effects arising from the structural decline of the book clubs channel. On a like-for-like basis, reported EBITDA came to -2.1 million euro versus -2.8 million euro in 9M15, as a result of a number of positive extraordinary items (0.4 million euro).

Designation of the Lead Independent Director

The Board of Directors, in accordance with the Corporate Governance Code, designated Independent Director Cristina Rossello as Lead Independent Director.

The Lead Independent Director remains in office for the same period as the members of the Board of Directors, thus until the Shareholders’ Meeting called to approve the financial statements for the year ending 31 December 2017.

The Board of Directors also approved the merger by incorporation, with no share exchange, of the wholly-owned company Banzai Media S.r.l., in accordance with the merger plan made available, as announced on 29 September, at the Company’s registered office, through the authorized storage mechanism 1info (www.1info.it) and on the Company website www.gruppomondadori.it (Governance section). The conclusion of the merger deed and the required entry in the Company Registry are scheduled by 15 January 2017, following expiry of the objection period for creditors pursuant to art. 2503 of the Italian Civil Code.

 The documentation relating to the presentation to analysts of the results for the first nine months of 2016 is made available to the public on the authorized storage mechanism 1info (www.1info.it) and on www.gruppomondadori.it (Investor section).

 Publication of the Interim Report on Operations at 30 September 2016

This Interim Report at 30 September 2016 was approved by the Board of Directors and is made available starting from today’s date at the Company’s registered office, on the authorized storage mechanism 1info (www.1Info.it) and on www.gruppomondadori.it (Investor section).

The Executive Manager responsible for drafting the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

Annexes (see pdf attached):

1. Consolidated financial situation
2. Consolidated income statement
3. Consolidated income statement – third quarter
4. Group cash flow
5. Glossary of terms and alternative performance measures used

[1] This document, in addition to the statements and conventional financial measures required by IFRS, presents a number of reclassified statements and alternative performance measures in order to better evaluate the operating and financial performance of the Group, the definition of which is explained in Annex 5 “Glossary of terms and alternative performance measures used” .

[2] On 1 January 2016, following reorganization, Digital Marketing Service activities and the central unit focused on the digital business of the Mondadori brands were transferred to Magazines Italy (previously included in Other Business, Corporate and Digital Innovation); the Area’s income statement was reclassified, for information sake, also in 9M15.

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Financial Report at 30 June 2016, presented by CEO Ernesto Mauri.

GROUP PERFORMANCE AT 30 JUNE 2016

In 2016, the Mondadori Group enjoyed a rather positive start to the year, even more rewarding if one considers the persisting volatile macroeconomic environment.

Specifically, after almost four years, revenue grew versus the prior year, a performance which confirms, along with the improvement in EBITDA for the tenth consecutive quarter, the success of the measures adopted over the past two years, paving the way to accomplishing the targets set for the full year, and marking the transition to the new phase of the Group’s development.

2Q16 saw the consolidation of Rizzoli Libri and Banzai Media, a major step in strengthening the leadership position in the Group’s strategic businesses, accelerating the growth process of the Company.

These acquisitions helped strengthen the already positive performance of revenue in 1H16, which increased by 8.6%.

In 1H16, consolidated net revenue amounted to 562.6 million euro, as mentioned, up by 8.6%. Net of the effects of the consolidation of the companies acquired in 2016, the Group reported a 1.1% increase.

Adjusted EBITDA amounted to 26.7 million euro, improving by 11.9% versus 23.8 million euro in 1H15. On a like-for-like basis, the growth is 15.9%, with a percentage on revenue increasing from 4.6% to 5.3%. This performance was the result of a constant and focused management policy successfully implemented in all of the Group’s business areas.

Consolidated EBITDA came to 22.5 million euro versus 19 million euro in 1H15, up by 18.7%, including the result of Rizzoli Libri (-1.5 million euro) and Banzai Media (+0.6 million euro). On a like-for-like basis, the increase amounts to 24%: a result that confirms the Group’s strong efficiency gains from its ability to stabilize revenue and the industrial and organizational review actions launched and implemented over the past two years.

Consolidated EBIT in 1H16 amounted to 8.5 million euro, including amortization and depreciation of 3 million euro relating to Rizzoli Libri; on a like-for-like basis, EBIT amounted to 12.4 million euro, improving by 34.7% versus 9.2 million euro in 1H15, despite the increase in amortization, depreciation and impairment losses (11.1 million euro versus 9.7 million euro at 30 June 2015), resulting from higher amortization following the upturn in investments.

The consolidated result before taxes amounted to 0.6 million euro, or to 4.6 million euro on a like-for-like basis, a sharp increase versus 0.6 million euro in 1H15, thanks also to the contribution of financial costs, which amounted to 7.8 million euro, decreasing sharply (-8.4%) as a result of the reduced average net debt in the period and average total cost of debt.

The Group consolidated net result amounted to -3.8 million euro, improving strongly versus -12.2 million euro at 30 June 2015, while on a like-for-like basis, the net result came to a positive 0.2 million euro.

Fixed-term or permanent staff employed by the Group at 30 June 2016 amounted to 3,404 units; the figure includes 438 resources coming from the acquisition of Rizzoli Libri and Banzai Media; on a like-for-like basis, Group staff would be down by 2.5%.

The Group net financial position at 30 June 2016 came to -374.8 million euro versus -326.5 million euro at 30 June 2015, as a result of the Group’s significant cash generation, including of an extraordinary nature, over the past 12 months, which allowed net investments in acquisitions of 157.3 million euro.

At 30 June 2016, cash flow from operations in the last twelve months, on a like-for-like basis, came to a positive 79.4 million euro, while cash flow from ordinary operations (after outlays for financial costs and taxes for the period) came to 51.5 million euro, continuing the rising trend seen in the seven previous quarters.

Including the effects of Rizzoli Libri and Banzai Media, the overall cash flow from ordinary operations amounted to 42.8 million euro, lower than the figure on a like-for-like basis, owing to the seasonal performance of the Rizzoli Libri business in 2Q16.

This performance was the result of constant and effective monitoring, and the ability to act and manage all of the economic and financial variables typical of all of the Group’s business areas.

OUTLOOK FOR THE YEAR

In light of the positive performance of the Group in the first half of the year and considering the integrations in progress, the forecasts previously announced on a like-for-like basis for the current year can be reasonably confirmed (basically steady revenue versus 2015 and a “high-single digit” growth in adjusted EBITDA, with a resulting increase in profit margins).

Including the effects of the consolidation of Rizzoli Libri (for 9 months) and of Banzai Media (for 7 months), revenue is expected to grow by approximately 14% versus 2015, while adjusted EBITDA is expected to increase by approximately 30%. The net financial position is expected to increase versus the figure at 31 December 2015, with a NFP/EBITDA ratio of about 3.5x, lower than the bank covenant of 4.5x.

CO-OPTATION OF A DIRECTOR

At today’s meeting, the Board of Directors took note of the resignation, for professional reasons, of non-executive director Bruno Ermolli, also member of the Remuneration and Appointment Committee.

Accordingly, the Board of Directors, pursuant to art. 2386 of the Italian Civil Code, and to art. 17.6 of the company by-laws, approved the appointment by cooptation of Paolo Ainio, who will remain in office until the next Shareholders’ Meeting.

At the same meeting, the Board of Directors, in accordance with the provisions of the Corporate Governance Code issued by Borsa Italiana S.p.A., approved the reintegration of the Remuneration and Appointment Committee, by appointing non-executive director Alfredo Messina, who replaces director Bruno Ermolli.

Mention should be made that director Bruno Ermolli, at the date of his resignation, holds no equity interest in the Company.

The curriculum vitae of director Paolo Ainio, who qualifies as a non-executive director, in accordance with the provisions of the Corporate Governance Code issued by Borsa Italiana S.p.A., is available on the Company’s website www.gruppomondadori.it, Governance section.

PERFORMANCE OF GROUP BUSINESS AREAS AT 30 JUNE 2016

• BOOKS

In 1H16, the Italian Trade Books market grew by +2.6% versus 1H15 (GFK, June 2016; figures in terms of market value). Against this backdrop, the Trade Books Area of Mondadori Libri was once again market leader, boasting a 22.9% share; following the acquisition of the Trade Books brands of Rizzoli Libri (Rizzoli, BUR and Fabbri Editori), the Group increased its overall Trade Books market share, reaching 28.8% (at 30 June 2016).

In the period under review, revenue from the Books Area of the Group amounted to 170.1 million euro, up by 37.9% versus 123.4 million euro in 1H15, as a result of the consolidation of Rizzoli Libri (with total revenue in the April/May 2016 period amounting to 36.6 million euro from the activities relating to trade, educational and Rizzoli International Publications, which operates in the high-end illustrated books market and through the activities of the Rizzoli Bookstore located in New York).

On a like-for-like basis, revenue from the Books Area of the Group increased by +8.2% versus 1H15.

Regarding the Trade Books Area on a like-for-like basis in 1H16 (net of the contribution of Rizzoli Libri), revenue amounted to 85.6 million euro, increasing by 14.3% versus 1H15, as a result of the positive performance of sales from the titles launched between the end of 2015 and the first half of the current year.

The Educational Area revenue grew by 17% on a like-for-like basis versus 1H15, as a result of supplies provided in advance in the school textbooks segment and of the positive performance of museum management activities.

Mondadori Libri’s adjusted EBITDA surged by over 29% on a like-for-like basis versus 1H15 to settle at 11 million euro, driven by the increase in revenue from the targeted publishing policy, by the remarkable success of the new titles published, and by the ongoing optimization of the operating processes implemented since 2015 in the Trade segment.

EBITDA on a like-for-like basis came to 10.7 million euro, doubling the result of 1H15 (5.2 million euro), thanks also to lower restructuring costs versus 1H15.

In the consolidation quarter (April-June 2016), Rizzoli Libri contributed negatively – 1.5 million euro – to the reported EBITDA of the Books Area, due mainly to the Educational Area’s seasonal performance, which generates most of its revenue in the second half of the year.

Reported EBITDA of the Books Area of the Group, including the effects of the consolidation of Rizzoli Libri, amounted to 9.1 million euro (+74.2% versus 1H15).

• MAGAZINES ITALY

In 1H16, Mondadori Group retained its leadership position in the magazines market, with a 32.1% share (Internal source: Press-di, figures in terms of value at May, newsstands + subscriptions).

In the period under review, revenue from the Magazines Italy Area amounted to 161.1 million euro[1], up by 1.1% versus 159.4 million euro in 1H15 (-0.8% on a like-for-like basis, net of the effects of the acquisition of Banzai Media).

Specifically:

• circulation revenue grew by 0.8%, due also to the contribution of the Mondadori Scienza titles;
• revenue from advertising sales dropped by 2%; print advertising sales of Magazines Italy lost 4%, in line with the market’s -3.6% (Nielsen; cumulative figures at May); sales on websites increased by 4.7%, outperforming the relevant market (-1.9%: Audiweb; cumulative figures at May). Overall, in the period under review (print+web), advertising sales on Mondadori brands in Italy were down by 2.7%.

Traffic data of Mondadori websites showed an overall audience rate of 8.4 million unique users (Audiweb, cumulative figures at May) versus 7.2 million at May 2015 (+16% on January-May average);

• revenue from add-on products sold in attachment to Mondadori magazines rose by 1.7% versus 1H15;
• distribution and revenue towards third publishers was in line with 1H15, thanks to the ongoing commitment to developing third-publisher portfolios;
• international operations achieved revenue of 3 million euro, down from the 3.5 million euro reported in 1H15, following the drop in licensing activities due to the deteriorated international macroeconomic environment and the negative effect of British and Chinese exchange rates;
• revenue from Digital Marketing Service activities (6.2 million euro) grew by 2%, as a result of the gradual expansion of the portfolio of solutions that had started last year.

In 1H16, Banzai Media contributed approximately 2.9 million euro to the Magazines Italy Area’s revenue (in June): with the acquisition of an audience of 16.4 million unique users (Audiweb, average figures at May 2016), Mondadori becomes the leading Italian digital publisher.

Adjusted EBITDA in the Magazines Italy Area improved considerably on a like-for-like basis (approximately +13%), rising from 8.8 million euro to 9.9 million euro, driven by the effective review of the publishing structure and of promotional activities, implemented while retaining the traditional focus on the publishing quality of the titles.

The half-year period saw a significant reduction in industrial costs, achieved also as a result of the renegotiation of printing contracts. Including the contribution of Banzai Media, the increase in the period is 20.4%.

Reported EBITDA in the Area more than confirmed the growth trend in 1H16, increasing by 17% on a like-for-like basis, and by 25% (including the consolidation of Banzai Media), thanks to the above measures and to lower restructuring costs.

• MAGAZINES FRANCE

In 1H16, revenue from Mondadori France amounted to 160.3 million euro, down by 3.8% versus 166.6 million euro in 1H15. Specifically:

• circulation revenue (making for approximately 75 of the total) lost 2.8% versus 1H15: revenue from subscriptions (53% of circulation revenue) was basically steady, partly offsetting the drop by the newsstand channel (-6.3%) and confirming the opportunity to continue investments in this channel;
• advertising revenue was down by 5.8% versus 1H15, but performance differed between offline (-10.9%) and online (18% of total advertising revenue) products, which reported a 27% increase.

The number of readers of Mondadori France magazines totaled 9.8 million unique users (Médiamétrie Netratings – Nielsen; average figure January/May 2016), up by approximately 19% versus 1H15, also as a result of the gradual digitization of the editorial teams.

Adjusted EBITDA came to 15.5 million euro, down by 3.8% versus 1H15, due mainly to M&A costs (0.6 million euro) incurred in the period. In keeping with the positive performance of 2015, digital activities enjoyed positive margins in 1H16 versus the loss in IH15.

Reported EBITDA, amounting to 14.2 million euro, dropped slightly versus 14.4 million in 1H15, as a result of the abovementioned M&A costs and of higher restructuring costs of approximately 0.3 million euro, arising from the voluntary redundancy plan launched in 2015, which has already produced benefits.

• RETAIL

In 1H16, the Retail Area achieved revenue of 88.2 million euro, improving by 2.8% versus 85.9 million euro in 1H15.

As of 1 April 2016, following the consolidation of the acquisition of Rizzoli Libri, Librerie Rizzoli activities, relating to the long-standing bookstore in Galleria Vittorio Emanuele, Milan, and to the rizzolilibri.it ecommerce site, have been absorbed by the Retail Area. Accordingly, on a like-for-like basis, the Retail Area grew by 1.6%, thanks mainly to the growth of the Franchised channel (+5.2%) and the Megastores (+3.8%), which more than offset the structural decline of the Book Clubs (-8.8%).

In 1H16, Mondadori Retail adjusted EBITDA, on a like-for-like basis, came to -3 million euro, improving versus -3.2 million euro in 1H15 (-3.1 million euro, including the result of Librerie Rizzoli in 2Q16). A result achieved through cost-curbing measures for stores and central functions, which determined a lower percentage of personnel costs and overheads, and more than offset the reduction in the product margin arising from the different product mix/channel, related also to the effects of the structural decline of the book clubs channel.

Reported EBITDA came to -3 million euro (-3.1 million euro including the result of Librerie Rizzoli;   -2.8 million euro in 1H15 as a result of positive extraordinary items).

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

CLOSING OF THE DISPOSAL OF MARSILIO EDITORI S.P.A.

On 26 July 2016, Arnoldo Mondadori Editore S.p.A. completed the disposal, through its subsidiary Rizzoli Libri S.p.A., of its 94.71% interest in the share capital of Marsilio Editori S.p.A. to GEM S.r.l.. The amount cashed in from the transaction is 8.9 million euro, based on an enterprise value in line with the price of the acquisition of the interest, part of the Rizzoli Libri transaction completed last 14 April 2016; the amount includes an adjusted positive net financial position of 1.3 million euro.

The disposal of Marsilio Editori S.p.A. was completed in accordance with the remedies set out in the provision issued by the Antitrust Authority. GEM S.r.l., a company operating in the publishing industry, headed by the De Michelis family, had held an interest in Marsilio Editori S.p.A. from 1985 to April 2016.

Based on the 2016 budget, Marsilio Editori is expected to achieve revenue of approximately 9.4 million euro and EBITDA of 1 million euro.

* * *

The documentation relating to the presentation of the results at 30 June 2016, will be made available through the authorized storage mechanism 1Info (www.1info.it) and in the Investor Relations section of the Company’s website www.gruppomondadori.it.

* * *

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

Annexes:

1. Consolidated balance sheet
2. Consolidated income statement
3. Consolidated income statement – second quarter
4. Group cash flow
5. Glossary of terms and alternative performance indicators used

* This document, in addition to the statements and conventional financial indicators required by IFRS, presents a number of reclassified statements and alternative performance measures in order to better evaluate the operating and financial performance of the Group, the definition of which is explained in Annex 5 “Glossary of terms and alternative performance measures used” .

[1] On 1 January 2016, following reorganization, Digital Marketing Services were transferred to Magazines Italy (previously included in Other Business, Corporate and Digital Innovation); the Area’s income statement has been reclassified, for information sake, also in the same half-year period of 2015.